JERUSALEM – At least 10 Palestinians, including six members of one family on a picnic, were killed when Israeli shells blew up on a Gaza Strip beach as children frolicked in the sand, Palestinian sources said.

Dozens of panicked, screaming bathers ran about the beach near Beit Lahiyah after the explosion scattered body parts and wounded dozens of people, witnesses said.

The death toll from that and a nearby Israeli airstrike could be as high as 16, Palestinian officials said.

Israeli officials expressed regret and said they were investigating the incident to determine whether shelling came from its navy ships or land artillery, or whether an unexploded bomb went off accidentally on the shore.

Nevertheless, the Hamas terror group, which has observed a truce with Israel since early 2005, retaliated this morning and fired several rockets at Israel from the Gaza Strip.

“The Israeli massacres represent a direct opening battle and that means the earthquake in the Zionist cities will resume and the herds of occupiers have no choice but to prepare the coffins or the departing luggage,” Hamas’ armed wing said in a statement, before breaking its 16-month ceasefire agreement.

“The earthquake in the Zionist towns will start again,” read a leaflet distributed at a Hamas rally.

The Israeli military also launched an investigation and expressed regret for “any harm caused to innocent civilians.”

The beach incident came as Israeli Prime Minister Ehud Olmert was under intense pressure to halt Qassam rocket attacks from Gaza on Israeli towns.

Residents of Sderot have been threatening to abandon the town if the daily attacks continue.

After four more rockets were fired yesterday, hitting a Sderot building, Israel retaliated with missile strikes that killed three people, including two Hamas operatives near Beit Lahiyah. Details of what happened at the beach, also near Beit Lahiyah, are unclear.

Dozens of bathers were enjoying the warm weather when a powerful explosion devastated the area.

“I was still parking the bus, and everyone got out to go to the beach. As I locked the door, I felt the thud of the shells and felt a sting in my side,” said Kamal Ghobn. He said he saw four shells land.

Reports of the number of dead ranged from seven to 13. It was the highest Palestinian death toll from a single Israeli attack in two years.

Hardest hit was the Ghalia family, which lost six members, among them the father, one of his two wives, an infant boy and an 18-month-old girl.

“This was his first day at the beach this summer. He was taking his kids to play. It’s destiny,” said Nasreen Ghalia, a sister-in-law of the dead father.

She said one of the survivors was a 7-year-old girl, Hadeel, who had not been told she had lost her parents and siblings.

“Hadeel is now an orphan,” she said.

More than 30 people were rushed to hospitals, where Palestinian Prime Minister Ismail Haniyeh, a top Hamas official, denounced the incident as “a war crime in every sense of the word.”

Palestinian President Mahmoud Abbas, a bitter foe of Haniyeh’s, called it “a bloody massacre” and declared a three-day period of mourning.

But Israeli Military Southern Command Chief Yoav Galant said there was no airstrike or shelling from the sea, as Palestinians charged.

He said his forces were investigating whether a ground-launched artillery shell had overshot its mark.

“We are exploring two possibilities – a wrongly aimed artillery shell or an independent incident we were not involved in,” Gallant told reporters.

An Israeli naval officer said an investigation showed that shells were in fact fired from a ship, but they all exploded in Gaza far from the beach.

But Hamas said the truce was over. “I believe that amid the continued bloodshed of our people and the horrific images of massacres, there is no place for silence,” spokesman Sami Abu Zuhri said.

The bloodshed complicates efforts by Palestinian factions to prevent a revival of fighting between Hamas members and Abbas loyalists. With Post Wire Services